How does long-term finance affect economic volatility?

Asli Demirgüç-Kunt, Balint Horvath, Harry Huizinga*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

7 Citations (Scopus)
256 Downloads (Pure)


In an approach analogous to Rajan and Zingales (1998), we examine how the ability to access long-term debt affects firm-level growth volatility. We find that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.

Original languageEnglish
Pages (from-to)41-59
Number of pages19
JournalJournal of Financial Stability
Early online date26 Oct 2017
Publication statusPublished - 1 Dec 2017

Structured keywords

  • AF Banking


  • Debt maturity
  • Financial dependence
  • Firm volatility
  • Financial development


Dive into the research topics of 'How does long-term finance affect economic volatility?'. Together they form a unique fingerprint.

Cite this